R&D Incentives with Uncertain Probability of Success

Article Type

Research Article

Publication Title

Studies in Microeconomics

Abstract

A firm’s decision to invest in R&D depends on a number of factors such as the availability of funds, extent of R&D spillovers, market structure and success probability. However, the probability of success depends, to a large extent, on factors endogenous to a firm. This means that the success probability can be known to the firm undertaking R&D investment, but not to the rivals; hence, there is incomplete information about probability of success in R&D. There are also uncertainties about the rivals’ R&D decision and R&D status. In a duopoly, we show that there is a non-monotone relation between R&D incentives and the level of information. JEL Classifications: D43, D82, LI3, O3I

First Page

127

Last Page

143

DOI

10.1177/23210222231178578

Publication Date

4-1-2025

Link to Full Text

Share

COinS